ACQUISITION SCHEME FAQ

Frequently Asked Questions – Acquisition Scheme

The following section provides answers to frequently asked questions in relation to the Acquisition Scheme. References to ‘sections’ in this document refer to the relevant sections in the Acquisition Scheme Booklet, which can be downloaded below.

Acquisition Scheme Booklet

 

What is the Transaction?

On 11 March 2019, Gindalbie announced the Transaction to the ASX. The Acquisition Scheme, Demerger Scheme and the Capital Reduction are together referred to as the Transaction. The Transaction will be implemented by way of two separate but inter-conditional schemes of arrangement and a capital reduction to effect the Demerger.

 

What is the Acquisition Scheme?

The Acquisition Scheme is a scheme of arrangement under Part 5.1 of the Corporations Act between Gindalbie and Acquisition Scheme Shareholders. If the Acquisition Scheme is implemented:

  • Acquisition Scheme Shareholders will receive the Acquisition Scheme Consideration of $0.026 for each Acquisition Scheme Share held on the Acquisition Scheme Record Date; and
  • Gindalbie will become a wholly-owned subsidiary of Ansteel and will apply to the ASX for termination of official quotation of Gindalbie Shares and to have itself removed from the official list of the ASX with effect from the close of business on the Business Day following the Implementation Date.

 

Please refer to Section 1 for a summary of the Acquisition Scheme.

 

What is the Demerger?

The Demerger is separate from the Acquisition Scheme. The Demerger involves the demerger of Coda, which is currently a wholly owned subsidiary of Gindalbie. Upon implementation of the Demerger, Coda will become a

standalone entity, separate to Gindalbie. The Demerger is proposed to occur by way of the Demerger Scheme and the Capital Reduction, which will result in 100% of the Coda Shares being distributed to, or for the benefit of, Gindalbie Shareholders.

 

If the Demerger is approved by Gindalbie Shareholders and implemented, Eligible Gindalbie Shareholders will receive 1 Coda Share for every 45 Gindalbie Shares they hold on the record date for the Demerger Scheme.

 

The Demerger is conditional on (among other things) the Requisite Majorities of Gindalbie Shareholders also approving the Acquisition Scheme.

 

Details of the Demerger are not included in this Acquisition Scheme Booklet. More information in relation to the Demerger can be found in the Demerger Scheme Booklet, which was sent to you at the same time as this Acquisition Scheme Booklet.

 

What is the Demerger Scheme?

The Demerger Scheme is a scheme of arrangement under part 5.1 of the Corporations Act between Gindalbie and “Demerger Scheme Shareholders”.  Gindalbie Shareholders will be asked to approve the Demerger Scheme at the Demerger Scheme Meeting.

 

More information in relation to Demerger Scheme can be found in the Demerger Scheme Booklet, which was sent to you at the same time as this Acquisition Scheme Booklet.

 

What is a “scheme of arrangement”?

A “scheme of arrangement” is a statutory procedure that can be used, among other things, as a means of implementing an acquisition of securities under the Corporations Act. To be implemented, a scheme of arrangement must be approved by 75% of the votes cast at meeting of shareholders and by 50% of the shareholders voting at that meeting (unless the Court orders otherwise), and also requires Court approval.

 

What is the Capital Reduction?

The Capital Reduction is a return of capital on your Gindalbie Shares, and is a necessary step to effect the Demerger. Both the Acquisition Scheme and the Demerger Scheme are conditional on the Capital Reduction being approved by Gindalbie Shareholders. You will not receive any cash from the Capital Reduction as it will be applied in consideration for the transfer of Coda Shares under the Demerger Scheme.

 

However, if the Acquisition Scheme is implemented, you will receive cash consideration of $0.026 for each Gindalbie Share you hold on the Acquisition Scheme Record Date, to be paid on the Implementation Date.

More information in relation to the Capital Reduction can be found in the Demerger Scheme Booklet, which was sent to you at the same time as this Acquisition Scheme Booklet.

 

Who is Ansteel?

Ansteel Parent is a People’s Republic of China state-owned enterprise established in July 2010, following a merger and reorganisation of Anshan Iron and Steel Group Corporation and Pangang Group Co., Ltd. Ansteel Parent is a Fortune 500 company and is one of the top steel manufacturers in the world. Ansteel is an indirectly wholly-owned subsidiary of Ansteel Parent through which it holds a 35.71% shareholding in Gindalbie.

 

If the Acquisition Scheme is implemented, Ansteel will acquire the shares in Gindalbie that it does not already own, and Gindalbie will become a wholly owned subsidiary of Ansteel.

 

Please refer to Section 5 for further information in relation to Ansteel.

Who is Coda?

Coda is currently a wholly-owned subsidiary of Gindalbie and was incorporated on 26 April 2018 as a public company limited by shares.

 

Coda was established to farm-in to up to a 75% interest in Mt Gunson. If the Demerger is implemented, it is intended that Coda will be an exploration company with a clear focus on progressing Mt Gunson, in which it has a right to earn up to a 75% interest, and delivering value for shareholders.

 

More information in relation to Coda, Mt Gunson and the Demerger can be found in the Demerger Scheme Booklet, which was sent to you at the same time as this Acquisition Scheme Booklet.

 

Why is Karara valued at nil by Gindalbie?

Gindalbie has valued Karara at nil ($0) since 2014 and continues to do so. This nil value has been derived due to Gindalbie’s financial models, which show Karara will not deliver a financial return to its shareholders (based on current assumptions and iron ore price forecasts). Based on these financial models, the value of Karara’s assets and its potential to earn revenue from the sale of iron ore minus the costs of sale is less than the total debt in the operation.

 

Gindalbie’s valuation of Karara is reviewed by Gindalbie’s management every six months. Gindalbie’s valuation of Karara is consistent with the view of the Independent Expert. The Independent Expert has valued Gindalbie’s interest in Karara at nil.

 

What is the total value of debt in Karara?

As at 31 December 2018, Karara had outstanding bank loan balances of US$3.19 billion, RMB 170m and A$100m.

Karara’s debt is a result of the costs of constructing the project plus the costs of supporting it, as Karara has incurred significant operating losses to date. As at the date of this Acquisition Scheme Booklet:

 

  • Karara continues to make a loss on each tonne of ore produced (on a modified all-in-cost basis) and requires ongoing funding to operate. As such, Karara’s debt has continued to grow; and
  • Ansteel supports Karara without assistance from Gindalbie as Gindalbie is unable at present to significantly contribute towards Karara’s ongoing costs.

 

Will a sustained increase in iron ore prices result in a return of value in Karara to Gindalbie and Gindalbie

Shareholders?

Based on Gindalbie’s internal financial modelling, as well as in the opinion of the Independent Expert, Karara is not expected to become profitable on a modified all-in-cost basis under current iron ore price forecasts.

 

By way of an illustrative example, Karara’s un-audited management accounts show that the average total cost of production per tonne of concentrate in 2018 was A$150.26 per tonne of concentrate produced (on a modified all-incost basis). The average price received during that period was A$123.07 per tonne.

 

Did Karara make a profit in 2017?

Karara is required to prepare annual financial reports and lodge them with ASIC. These reports are publicly available and can be obtained from ASIC for a fee.

 

Karara’s financial reports for the period ending 31 December 2017 show a profit of approximately $45 million. This profit is due to an “unrealised foreign exchange gain” of $228 million. This gain is not a realised profit and is an accounting item relating to the AUD value of USD-denominated debt.

 

In the opinion of the Independent Directors, the “Net Cash used in Operating Activities” column in Karara’s cash flow statement is more reflective of Karara’s operating performance. This column shows that Karara’s operations

used $299 million more in cash than those operations brought in to Karara in the period ending 31 December 2017. This figure is similar to the corresponding figure in Karara’s financial reports for the period ending 30

June 2016, which is $366 million.

 

During the period ending 31 December 2017, Karara’s financial reports show that Karara repaid $630 million of debt and borrowed an additional $1.034 billion, resulting in an additional $404 million in debt relative to the start of the period. As at the date of this Acquisition Scheme Booklet, Karara is not paying down its net debt and is not in a position to do so.

 

Why is the cost of Karara’s production so high?

Karara was conceptualised during a different and unprecedented time in the global iron ore cycle, when the benchmark iron ore price was continuously trading above US$120 per tonne of iron ore. The operation was expected to be able to utilise the Oakajee Port and Rail project to expand production and reduce the cost of transport and shipping from the Mid-West. Unfortunately, that project did not proceed.

 

Karara’s cost of production is primarily driven by several key factors:

  • mining and processing magnetite is comparably higher in cost than mining hematite due to the additional crushing and processing of low grade ores;
  • Karara’s cost of servicing and repaying its debt is high, especially when amortised over the relatively low production rate of 8 million dry tonnes of ore per annum;
  • Karara’s total debt levels are high due to the high capital cost of constructing the project and ongoing losses;
  • the cost of rail transport for Karara’s ore is higher than iron ore companies in the Pilbara; and
  • the cost of shipping Karara’s ore is significantly higher than the majority of other Australian iron ore companies as Karara ships its ore from Geraldton.

 

Would operational efficiencies and cost reduction materially affect the value of Karara?

Since Karara was commissioned, it has undertaken a significant number of cost reduction exercises.

 

The Independent Directors consider that it is unlikely that any additional measures would have a material effect on Karara’s costs and the economics of the project. Accordingly, the Independent Directors consider that even a significant program to reduce Karara’s operational and processing costs would be unlikely to change the value attributed to Karara by Gindalbie (currently nil).

 

What are the implications for Gindalbie Shareholders of an expansion of Karara?

The iron ore price environment when Karara was conceived was radically different to the current environment. Prices when Karara was conceived were consistently above US$120 per tonne.

 

Furthermore, Karara was also expected to be able to utilise the Oakajee Port and Rail project to expand production and reduce the cost of transport and shipping from the Mid-West. Unfortunately, that project did not proceed.

 

Although some of Karara’s infrastructure was built to complement the potential expansion of Karara’s operations to 16 million tonnes per annum, the Independent Directors understand that it is not currently considered financially viable to expand Karara’s production. The expansion of production would entail the construction of significant additional infrastructure and processing capacity. The increase in tonnage would not generate sufficient free cash flow to be able to support the capital cost of expansion based on current iron ore price forecasts.

 

More importantly for Gindalbie Shareholders, if Karara were to obtain and commit the significant capital required to expand production, Gindalbie would not be in a position to fund its share of that expenditure and would, if Ansteel opted to fund Karara via equity contributions, have its interests in Karara diluted.

 

The additional value of the infrastructure that Karara built to reach stage two was also written off by Gindalbie in 2014 when it made the decision to write down the value of its investment in Karara. The Independent Directors believe there is no reasonable basis to expect a return of this investment to Karara’s shareholders, including Ansteel.

 

Karara used to export direct shipping ore. Why has this ceased?

Direct shipping ore, also known as hematite, is generally of lower grade in the Mid-West than in the Pilbara and commands a significant discount due to its lower grade and higher impurities.

 

Although direct shipping ore, primarily from the Hinge deposit, was an important source of additional revenue during Karara’s commissioning phase, Karara now operates at, or close to, its nameplate capacity of eight million

dry tonnes (approximately eight million eight hundred thousand wet tonnes) per annum. This means that there is no additional infrastructure capacity to support the export of direct shipping ore.

 

At current and forecast iron ore prices (as forecast by independent and reputable commercial forecasters), the Independent Directors understand that Karara does not have any economic reserves of direct shipping ore.

 

Does Karara receive a fair price for its concentrate?

The premium Karara receives for its concentrate varies (which is normal in the iron ore market) but is generally between 15% and 33% relative to the 62% Platts IODEX. This represents a significant premium relative to the grade differential of 62% to 66%.

 

Karara received an average premium relative to the 62% Platts IODEX of:

  • 57% in 2017; and
  • 92% in 2018.

 

The price that Karara receives also includes a penalty for the relatively higher silica content of its concentrate plus a premium for the “value in use” of the concentrate.

 

The prices received for Karara concentrate, including the “value in use” premium, are disclosed in Gindalbie’s quarterly reports and are freely available to all Gindalbie Shareholders. Gindalbie’s management and the Independent Directors monitor the prices that Karara receives for its concentrate and believe they fairly reflect market pricing.

 

It is important to note that Karara sells a concentrate product and not a pellet product. Pellet products are priced on a different scale and command a different premium to concentrate products. The case for a pelletisation plant was studied in detail in 2013 and found to be uneconomic based on the cost of inputs to the plant and capital costs of construction versus expected premiums.

 

Will Gindalbie be repaid the shareholder loan it advanced to Karara?

Gindalbie previously extended a shareholder loan to Karara. This loan is subordinated to Karara’s project finance facility, which means Karara’s senior lenders have a right to be repaid first.

 

As part of Gindalbie’s decision to write down the carrying value of its interest in Karara to nil ($0) in 2014, the loan referred to above was also impaired to nil. Gindalbie conducts impairment testing in accordance with the Australian Accounting Standards, and that loan remains valued at nil for the reason that there is no reasonable basis to expect repayment.

 

If the Transaction does not proceed, there is no reasonable basis to expect that Gindalbie will receive repayment of its shareholder loan.

 

Does the Acquisition Scheme Consideration reflect the value of Lodestone?

Lodestone is a large iron ore resource located 45km southeast of Karara or approximately 255km south-southeast of Geraldton. Gindalbie holds the resource on a retention licence.

 

Lodestone has a JORC 2012 compliant inferred resource of 644 million tonnes of magnetite. The Independent Directors consider that Lodestone is not economic to mine in the current iron ore price environment, and there is no economic basis to proceed with any additional drilling and feasibility work.

 

The Lodestone resource is of significantly lower quality than Karara and, in the opinion of the Independent Directors, it is unlikely that Lodestone would ever be mined in preference to the superior Karara ore.

 

The holding value of Lodestone in Gindalbie’s accounts is $1.36 million. This deposit has some strategic value and has been factored into the value of the Acquisition Scheme Consideration.

 

What is the effect of approving the Acquisition Scheme?

The Acquisition Scheme will be implemented if:

  • the Acquisition Scheme is approved by the Requisite Majorities at the Acquisition Scheme Meeting;
  • the Acquisition Scheme is approved by the Court; and
  • all other Conditions to the Acquisition Scheme are satisfied or waived (as applicable).

 

Who is entitled to participate in the Acquisition Scheme?

You will be entitled to participate in the Acquisition Scheme if you are registered as a Gindalbie Shareholder (holding Acquisition Scheme Shares) on the Acquisition Scheme Record Date.

 

What happens if the Acquisition Scheme does not proceed?

If the Acquisition Scheme does not proceed:

  • no Gindalbie Shareholders will receive the Acquisition Scheme Consideration;
  • Gindalbie will continue to operate as a stand-alone entity, and remain listed on the ASX; and
  • the Demerger will not proceed, and so no Gindalbie Shareholders will receive any Coda Shares.

 

What consideration will I receive if the Acquisition Scheme is implemented?

If the Acquisition Scheme is implemented, you will receive the Acquisition Scheme Consideration of $0.026 for each Gindalbie Share you hold on the Acquisition Scheme Record Date.

 

Fractional entitlements to a cent under the Acquisition Scheme Consideration will be rounded up or down to the nearest cent (rounded up if the fractional entitlement is equal to or greater than one half, and rounded down if the fractional entitlement is less than one half).

 

Please refer to Section 9 for a description of the general tax implications of the Acquisition Scheme for Australian residents.

 

When will I receive the Acquisition Scheme Consideration?

If the Acquisition Scheme becomes Effective, the Acquisition Scheme Consideration will be paid on the Implementation Date, which is expected to occur on 23 July 2019.

 

If the Acquisition Scheme is not approved by the Requisite Majorities of Gindalbie Shareholders at the Acquisition Scheme Meeting or by the Court, or if any other Conditions are not satisfied or waived (as applicable), the

Acquisition Scheme Consideration will not be paid.

 

Does the Acquisition Scheme Consideration represent a premium  to Gindalbie’s VWAP?

The Acquisition Scheme Consideration represents a significant premium of:

  • 78% to Gindalbie’s 30 day VWAP leading up to the Announcement Date of $0.0137;
  • 93% to Gindalbie’s 60 day VWAP leading up to the Announcement Date of $0.0153;
  • 61% to Gindalbie’s 90 day VWAP leading up to the Announcement Date of $0.0157; and
  • 49% to Gindalbie’s 120 day VWAP leading up to the Announcement Date of $0.0161.

 

Will I have to pay brokerage fees or stamp duty?

No brokerage or stamp duty will be payable on the disposal of your Gindalbie Shares under the Acquisition Scheme.

 

How will I receive the Acquisition Scheme Consideration?

Section 1.7 describes how the Acquisition Scheme Consideration will be paid.

 

Am I eligible to receive the Acquisition Scheme Consideration?

If you hold Gindalbie Shares on the Acquisition Scheme Record Date, you will participate in the Acquisition Scheme and be paid the Acquisition Scheme Consideration to which you are entitled under, and in accordance with, the terms of the Acquisition Scheme.

 

How is Ansteel funding the Acquisition Scheme Consideration?

The maximum amount of cash payable by Ansteel in connection with the Acquisition Scheme is approximately $25.2 million.

 

For more information about Ansteel’s funding arrangements please refer to Section 5.

 

What are the tax consequences of the Acquisition Scheme for me?

Section 9 provides a description of the general tax implications of the Acquisition Scheme for Australian residents.

 

You should consult with your own tax adviser regarding the consequences of receiving the Acquisition Scheme Consideration and disposing of your Gindalbie Shares to Ansteel in accordance with the Acquisition Scheme in

light of current tax laws and your particular circumstances.

 

What is the tax direction?

As set out in the Demerger Scheme Booklet, which was sent to you at the same time as this Acquisition Scheme Booklet, Gindalbie may need to withhold an amount of tax as a result of the Demerger Scheme. It is not practicable to withhold tax from the Demerger Scheme Consideration to be transferred under the Demerger Scheme, given that the Demerger Scheme Consideration comprises Coda Shares and does not contain a cash component.

 

To address this, the Demerger Scheme and the Acquisition Scheme contain certain provisions, the effect of which is that Gindalbie is directed to pay that withholding on the relevant person’s behalf and apply a portion of the

Acquisition Scheme Consideration payable to that person as is necessary to repay that amount.

 

Please refer to Section 7.4 for further information on the tax direction.

 

Will there be any tax withholdings from the Acquisition Scheme Consideration I receive?

Under Australian foreign resident capital gains tax withholding rules, Ansteel is required to consider whether an Acquisition Scheme Shareholder is a Relevant Foreign Resident. If Ansteel reasonably believes that an Acquisition Scheme Shareholder is a Relevant Foreign Resident as at the Acquisition Scheme Record Date, then unless the Acquisition Scheme Shareholder has provided a signed and completed Relevant Foreign Resident Declaration Form, Ansteel may be required to withhold and pay to the ATO a foreign resident capital gains tax withholding amount of 12.5% of the Acquisition Scheme Consideration (or some lesser ATO varied amount).

 

Ansteel will look at a number of factors when considering whether an Acquisition Scheme Shareholder is a Relevant Foreign Resident including but not limited to circumstances in which the Acquisition Scheme Shareholder:

  • is classified as a non-resident on the Gindalbie Share Register; or
  • has a foreign Registered Address.

 

If Ansteel reasonably believes that you will be a Relevant Foreign Resident, then you should have received a Relevant Foreign Resident Declaration Form with this Acquisition Scheme Booklet. If you are provided with a Relevant Foreign Resident Declaration Form then you should ensure that you read it in full together with the further details on the Australian foreign resident capital gains tax withholding rules set out in Section 9 (Tax Implications of the Acquisition Scheme) and follow the instructions provided in the Relevant Foreign Resident Declaration Form.

 

To the extent you are able to make a declaration set out in the Relevant Foreign Resident Declaration Form, you must return your signed and completed Relevant Foreign Resident Declaration Form by the Acquisition

Scheme Record Date so that Ansteel does not withhold and pay to the ATO an amount in respect of the foreign resident capital gains tax withholding rules.

 

If for whatever reason, you think that you will be a Relevant Foreign Resident but you did not receive a Relevant Foreign Resident Declaration Form with this Acquisition Scheme Booklet then you should contact the Gindalbie

Shareholder Information Line on 1300 308 375 (for callers within Australia) or +61 8 6314 6314 (for callers outside Australia) between 9.00 am and 5.00 pm (Perth time) Monday to Friday to request a Relevant Foreign Resident Declaration Form.

 

Section 9 (Tax Implications of the Acquisition Scheme) sets out further details on the Australian foreign resident capital gains tax withholding rules.

 

If you are in doubt about what you should do in respect of the Australian foreign resident capital gains tax withholding rules including if you are eligible to make a declaration in the Relevant Foreign Resident Declaration Form, you should seek independent taxation advice in relation to your particular circumstances.

 

If you have not provided your TFN, TFN exemption or ABN to Gindalbie, Gindalbie will withhold and pay to the ATO, 47% of the dividend component (if any) of the Demerger Scheme Consideration. If you have not already done so, then you should provide your TFN, TFN exemption or ABN to Gindalbie by contacting the Gindalbie Shareholder Information Line on 1300 308 375 (for callers within Australia) or +61 8 6314 6314 (for callers outside Australia) between 9.00 am and 5.00 pm (Perth time) Monday to Friday.

 

As the Demerger Scheme Consideration is not cash, the required amount of any withholding will be deducted from the Acquisition Scheme Consideration that may be payable to you and paid to the ATO. Please refer to Sections 1.5 and 7.4 and the question immediately above (“What is the tax direction?”) for further information in respect of the relevant withholding process.

 

When and where will the Acquisition Scheme Meeting be held?

The Acquisition Scheme Meeting will be held at 9.30 am (Perth time) on 3 July 2019 at the Perth Convention and Exhibition Centre, Meeting Room 8.

 

What am I being asked to vote on at the Acquisition Scheme Meeting?

At the Acquisition Scheme Meeting, you are being asked to vote on whether to approve the Acquisition Scheme by voting in favour, or against, the Acquisition Scheme Resolution.

 

The text of the Acquisition Scheme Resolution is contained in the Notice of Acquisition Scheme Meeting set out in Annexure E.

 

What vote is required to approve the Acquisition Scheme?

For the Acquisition Scheme to be approved by Gindalbie Shareholders, votes in favour of the Acquisition Scheme Resolution must be received from:

 

  • unless the Court orders otherwise, a majority in number (more than 50%) of Gindalbie Shareholders present and voting at the Acquisition Scheme Meeting (either in person, by proxy or attorney or in the case of corporate Gindalbie Shareholders, by a duly appointed corporate representative); and
  • at least 75% of the total number of votes cast on the Acquisition Scheme Resolution by Gindalbie Shareholders at the Acquisition Scheme Meeting.

 

Even if the Acquisition Scheme is approved by Gindalbie Shareholders at the Acquisition Scheme Meeting, the Acquisition Scheme will still be subject to the approval of the Court and all other Conditions being satisfied or waived (as applicable) before the Acquisition Scheme can be implemented.

 

Am I entitled to vote at the Acquisition Scheme Meeting?

The time for determining eligibility of registered Gindalbie Shareholders to vote at the Acquisition Scheme Meeting is 5.00 pm (Perth time) on 1 July 2019. Only those Gindalbie Shareholders entered in the Gindalbie Share Register at that time will be entitled to vote at the Acquisition Scheme Meeting.

 

How do I vote?

Please refer to Section 3 for detailed information on how to vote on the Acquisition Scheme.

 

Should I vote at the Acquisition Scheme Meeting?

Voting is not compulsory. However, the Independent Directors believe that the Acquisition Scheme is important to all Gindalbie Shareholders. The Independent Directors unanimously recommend that you vote in favour of the Acquisition Scheme Resolution at the Acquisition Scheme Meeting, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Acquisition Scheme is in the best interests of Gindalbie Shareholders.

 

What happens if I do not vote, or vote against the Acquisition Scheme?

The Acquisition Scheme may not be approved at the Acquisition Scheme Meeting by the Requisite Majorities of Gindalbie Shareholders. If this occurs, the Acquisition Scheme will not be implemented, you will not receive the

Acquisition Scheme Consideration and you will remain a Gindalbie Shareholder.

 

However, if you do not vote or if you vote against the Acquisition Scheme, the Acquisition Scheme will still become binding on all Acquisition Scheme Shareholders if the Acquisition Scheme is approved by the Requisite

Majorities of Gindalbie Shareholders, the Court approves the Acquisition Scheme and all other Conditions are satisfied or waived (as applicable).

 

This is so even if you did not vote at all or if you voted against the Acquisition Scheme.

 

What happens if the Acquisition Scheme is not approved at the Acquisition Scheme Meeting?

If the Acquisition Scheme is not approved at the Acquisition Scheme Meeting, the Acquisition Scheme will not be implemented. This means that Gindalbie Shareholders will retain their Gindalbie Shares, Gindalbie will continue to operate as a standalone entity listed on the ASX, no Gindalbie Shareholders will receive the Acquisition Scheme Consideration and the Demerger will not be implemented (given the inter-conditional

nature of the Transaction).

 

In such circumstances, Gindalbie will continue to focus on its current business plan and growth strategy. Gindalbie Shareholders will remain exposed to the risks of Gindalbie, as discussed in Section 6.

 

If the Acquisition Scheme is not implemented and no Superior Proposal emerges, the trading price of Gindalbie Shares is likely to fall in the nearterm.

 

What is Ansteel’s voting intention?

Ansteel will not be voting on the Acquisition Scheme.

 

When will the results of the Acquisition Scheme Meeting be known?

The results of the Acquisition Scheme Meeting will be declared at the Acquisition Scheme Meeting and will be announced publicly shortly after the conclusion of the Acquisition Scheme Meeting.

 

Are any other approvals required?

The Acquisition Scheme must be approved by the Court in addition to being approved by the Requisite Majorities of Gindalbie Shareholders, and all other Conditions must be satisfied or waived (as applicable). If the Acquisition

Scheme is approved by the Requisite Majorities of Gindalbie Shareholders at the Acquisition Scheme Meeting, the Demerger Scheme is approved by the Requisite Majorities of Gindalbie Shareholders at the Demerger Scheme Meeting and the Capital Reduction is approved by Gindalbie Shareholders at the General Meeting, Gindalbie will apply to the Court for approval of the Acquisition Scheme.

 

The Court hearing for approval of the Acquisition Scheme is currently expected to be held on 8 July 2019.

 

Who are the Independent Directors and what do they recommend?

The Independent Directors are Keith Jones, Andrew (Robin) Marshall and Paul Hallam. Ge Li and An Lin Shao are not considered independent directors of Gindalbie (given they are nominees of Ansteel) and do not consider it

appropriate to make a recommendation in relation to the Acquisition Scheme.

 

The Independent Directors unanimously recommend that Gindalbie Shareholders vote in favour of the Acquisition Scheme Resolution, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Acquisition Scheme is in the best interests of Gindalbie Shareholders.

 

How do your Independent Directors intend to vote?

Each Independent Director intends to cause any Gindalbie Shares in which he has a Relevant Interest to be voted in favour of the Acquisition Scheme Resolution, in the absence of a Superior Proposal and subject to the Independent Expert continuing to conclude that the Acquisition Scheme is in the best interests of Gindalbie Shareholders.

 

As at the date of this Acquisition Scheme Booklet, the Relevant Interests of each Independent Director in Gindalbie Shares is as follows:

 

  • Keith Jones: 300,000 (0.02%);
  • Andrew (Robin) Marshall: 200,000 (0.01%); and
  • Paul Hallam: 100,000 (0.01%).

 

Please refer to Section 10.1 for further details of the interests of the Independent Directors (and the other Gindalbie Directors).

 

What is the Independent Expert’s conclusion?

The Independent Directors engaged BDO as an independent expert to provide a report on the Acquisition Scheme.

 

The Independent Expert has concluded the Acquisition Scheme is fair and reasonable and therefore in the best interests of Gindalbie Shareholders in the absence of a superior proposal.

 

A copy of the Independent Expert’s Report, including the reasons for the Independent Expert’s conclusion, is set out in Annexure B.

 

The Independent Directors encourage you to read the Independent Expert’s Report in its entirety before making a decision as to whether or not to vote in favour of the Acquisition Scheme Resolution.

 

What if the Independent Expert changes its opinion?

If the Independent Expert changes its opinion, this will be announced to the ASX and the Independent Directors will carefully consider the Independent Expert’s revised opinion and advise you of their recommendation.

 

What are the reasons to vote in favour of the Acquisition Scheme?

The reasons to vote in favour of the Acquisition Scheme Resolution are set out in the “Reasons to vote in favour of the Acquisition Scheme” Section on pages 13 to 17.

 

What are the possible reasons not to vote in favour of the Acquisition Scheme?

The possible reasons not to vote in favour of the Acquisition Scheme Resolution are set out in the “Reasons to vote against the Acquisition Scheme” Section on pages 18 to 19.

 

Is the Acquisition Scheme subject to any Conditions?

The implementation of the Acquisition Scheme is subject to a number of Conditions. The Conditions are summarised in Annexure A.

 

As at the date of this Acquisition Scheme Booklet, the outstanding Conditions (which must be satisfied or waived, as applicable) include:

 

  • the Acquisition Scheme being approved at the Acquisition Scheme Meeting;
  • the Demerger Scheme being approved at the Demerger Scheme Meeting;
  • the Capital Reduction being approved at the General Meeting;
  • the Acquisition Scheme being approved by the Court at the Second Court Hearing;
  • certain Chinese regulatory approvals being obtained by the Acquisition Scheme Meeting; and
  • no Material Adverse Change occurring.

 

When will the Acquisition Scheme become Effective?

The Acquisition Scheme will become Effective on the date on which the Court order approving the Acquisition Scheme is lodged with ASIC. The Acquisition Scheme is currently expected to become Effective on 9 July 2019.

 

When will the Acquisition Scheme be implemented?

If the Acquisition Scheme becomes Effective, the Acquisition Scheme will be implemented on the Implementation Date (being the fifth Business Day after the Acquisition Scheme Record Date), which is currently expected to be 23 July 2019.

 

What happens if the Acquisition Scheme is approved at the Acquisition Scheme Meeting, but is not

approved by the Court?

If the Acquisition Scheme is approved at the Acquisition Scheme Meeting but is not approved by the Court, the Acquisition Scheme will not be implemented.

 

This means that Gindalbie Shareholders will retain their Gindalbie Shares, Gindalbie will continue to operate as a standalone entity listed on the ASX, no Gindalbie Shareholders will receive the Acquisition Scheme Consideration and the Demerger will not be implemented (given the inter-conditional nature of the Transaction).

In such circumstances, Gindalbie will continue to focus on its current business plan and growth strategy. Gindalbie Shareholders will remain exposed to the risks of Gindalbie, as discussed in Section 6.

 

If the Acquisition Scheme is not implemented and no Superior Proposal emerges, the trading price of Gindalbie Shares is likely to fall in the nearterm.

 

Can I keep my Gindalbie Shares?

If the Acquisition Scheme is implemented, your Gindalbie Shares will be transferred to Ansteel. This will happen even if you did not vote at all or you voted against the Acquisition Scheme at the Acquisition Scheme Meeting.

 

Can I sell my Gindalbie Shares now?

You can sell your Gindalbie Shares on market at any time before close of trading on the ASX on the Effective Date. However, if you do so you will receive the prevailing on-market price set at the time of sale, which may not be the same price as the Acquisition Scheme Consideration, and you may be required to pay brokerage.

Gindalbie intends to apply to the ASX for Gindalbie Shares to be suspended from official quotation on the ASX from close of trading on the Effective Date.

 

You will not be able to sell your Gindalbie Shares on market after this time.

 

What choices do I have as a Gindalbie Shareholder?

As a Gindalbie Shareholder you have the following choices:

  • vote in favour of the Acquisition Scheme Resolution at the Acquisition Scheme Meeting;
  • vote against the Acquisition Scheme Resolution at the Acquisition Scheme Meeting;
  • sell your Gindalbie Shares on the ASX; or
  • do nothing.

 

What do I do if I oppose the Acquisition Scheme?

If you, as a Gindalbie Shareholder, oppose the Acquisition Scheme, you should:

  • contact the Gindalbie Shareholder Information Line on 1300 308 375 (for callers within Australia) or +61 8 6314 6314 (for callers outside Australia) between 9.00 am and 5.00 pm (Perth time) Monday to Friday and obtain further information;
  • attend the Acquisition Scheme Meeting and vote against the Acquisition Scheme Resolution; and/or
  • if Gindalbie Shareholders approve the Acquisition Scheme at the Acquisition Scheme Meeting and you wish to appear at the Second Court Hearing and oppose the approval of the Acquisition Scheme, file with the Court and serve on Gindalbie a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. Please refer to the “Important notices” section for further details under the heading “Notice of Second Court Hearing and if a Gindalbie Shareholder wishes to oppose the Acquisition Scheme” on page 4.

 

What happens if not all of the Transaction Resolutions are approved?

If not all of the Transaction Resolutions are approved at the Transaction Meetings, then the Acquisition Scheme will not proceed. The Acquisition Scheme and the Demerger Scheme are separate transactions, but they are both conditional on all Transaction Resolutions being approved. This means that Gindalbie Shareholders must approve each resolution by the relevant threshold for the Acquisition Scheme to proceed.

 

When will Gindalbie Shares cease trading on the ASX?

Provided the Acquisition Scheme becomes Effective, suspension of trading in Gindalbie Shares on the ASX is expected to occur from the close of trading on the Effective Date. This is expected to occur on 9 July 2019.

 

What are the potential risks associated with Gindalbie if the Acquisition Scheme is not implemented?

If the Acquisition Scheme is not implemented, the risks outlined in Section 6 will continue to be relevant to the future operating and financial performance of Gindalbie and the value of Gindalbie Shares.

 

Do I need to sign anything to transfer my Gindalbie Shares?

No. If the Acquisition Scheme becomes Effective, Gindalbie will automatically have authority to sign a transfer on your behalf and the Acquisition Scheme Consideration will be transferred to you.

 

Am I required to give any assurances by participating in the

Acquisition Scheme?

Under the Acquisition Scheme, you are deemed to have warranted to Ansteel that:

  • all your Acquisition Scheme Shares (including any rights and entitlements attaching to those shares) will, at the date of transfer of them to Ansteel, be fully paid and free from all Security Interests and from any restrictions on transfer of any kind; and
  • you have full power and capacity to sell and to transfer your Acquisition Scheme Shares together with any rights and entitlements attaching to such shares to Ansteel under the Acquisition Scheme.

 

Please refer to Section 7.3 for further information on this warranty.

 

What will happen to the Gindalbie Options?

As contemplated by the Acquisition Scheme Implementation Agreement, as at 8.00 am (Perth time) on the Second Court Date, Gindalbie must put in place arrangements so that all Gindalbie Options outstanding will vest

(resulting in the issue of Gindalbie Shares) before the Acquisition Scheme Record Date, which is 5.00 pm (Perth time) on 16 July 2019.

 

Please refer to Section 1.12 for further details about the treatment of Gindalbie Options.

 

Under what scenarios can Gindalbie or Ansteel terminate the transaction?

The transaction can be terminated by Gindalbie or Ansteel in certain circumstances, which are summarised in Annexure A and set out in full in clause 14 of the Acquisition Scheme Implementation Agreement.

 

Is there a reimbursement fee payable by Gindalbie?

Yes. A reimbursement fee up to a maximum of $500,000 is payable by Gindalbie to Ansteel in certain circumstances, which are summarised in Annexure A and set out in full in clause 10 of the Acquisition Scheme

Implementation Agreement.

 

Is there a reimbursement fee payable by Ansteel?

Yes. A reimbursement fee up to a maximum of $500,000 is payable by Ansteel to Gindalbie in certain circumstances, which are summarised in Annexure A and set out in full in clause 10 of the Acquisition Scheme

Implementation Agreement.

What happens if Gindalbie is approached in relation to a Competing Proposal?

If Gindalbie is approached in relation to a Competing Proposal, the Independent Directors will carefully consider the proposal having regards to Gindalbie’s obligations under the Acquisition Scheme Implementation Agreement and advise Gindalbie Shareholders of their recommendation.

 

Gindalbie must notify Ansteel of any approach in connection with a Competing Proposal in accordance with the Acquisition Scheme Implementation Agreement.

 

What happens if a Superior Proposal emerges?

If a Superior Proposal emerges, this will be announced to the ASX and the Independent Directors will carefully reconsider the Acquisition Scheme and advise Gindalbie Shareholders of their recommendation.

 

Under the Acquisition Scheme Implementation Agreement, Gindalbie has granted Ansteel notification and matching rights, which are summarised in Annexure A and set out in full in clauses 9.2 and 9.3 of the Acquisition

Scheme Implementation Agreement.

 

What is a Superior Proposal?

Under the terms of the Acquisition Scheme Implementation Agreement, a Superior Proposal is a bona fide Competing Proposal which the Gindalbie Board considers (in certain circumstances) to be more favourable to

Gindalbie Shareholders (as a whole) than the Transaction.

 

Please refer to section 1.1 of the Acquisition Scheme Implementation Agreement for further details regarding what constitutes a Superior Proposal.

 

What are the prospects of receiving a Superior Proposal?

Since the initial announcement of the Transaction on 11 March 2019 and up to the date of this Acquisition Scheme Booklet, no Superior Proposal has emerged and the Independent Directors are not aware of any Superior Proposal that is likely to emerge.

 

Gindalbie Shareholders should be aware that Gindalbie has agreed to certain exclusivity and reimbursement fee provisions in favour of Ansteel, which are summarised in Annexure A and contained in clauses 9 and 10 of the

Acquisition Scheme Implementation Agreement.

 

What if I have other questions?

If you have any questions in relation to this Acquisition Scheme Booklet or the Acquisition Scheme you should contact the Gindalbie Shareholder Information Line on 1300 308 375 (for callers within Australia) or +61 8 6314

6314 (for callers outside Australia) between 9.00 am and 5.00 pm (Perth time) Monday to Friday.

 

For information about your individual financial or taxation consequences, please consult your independent financial, legal or taxation adviser.